Posted
by
samzenpus
on Wednesday April 05, 2006 @07:59AM
from the there-can-be-only-one dept.

grouchomarxist writes "Netflix is suing Blockbuster for Patent Infringement. From the article: 'Netflix holds two U.S. patents for its business methodology, which calls for subscribers to pay a monthly fee to select and rent DVDs from the company's Web site and to maintain a list of titles telling Netflix in which order to ship the films, according to the patents, which were included as exhibits in the lawsuit.
The first patent, granted in 2003, covers the method by which Netflix customers select and receive a certain number of movies at a time, and return them for more titles.
The second patent, issued on Tuesday, "covers a method for subscription-based online rental that allows subscribers to keep the DVDs they rent for as long as they wish without incurring any late fees, to obtain new DVDs without incurring additional charges and to prioritize and reprioritize their own personal dynamic queue -- of DVDs to be rented," the lawsuit said.'"

The first patent, granted in 2003, covers the method by which Netflix customers select and receive a certain number of movies at a time, and return them for more titles.

So a common-sense business method is patentable? The U.S. patent system really is broken, I'd encourage all to read Jaffe & Lerner's Innovation and Its Discontents [amazon.com] to see just how broken it is. Personally, I think there's no hope of repair, and innovation would progress better were the entire system thrown out. But patents are seen as such a triumph of early American government, with founding fathers like Jefferson in favor of them. Plus, our legislature is currently enslaved to monetary interests. So, we're stuck in quite a pickle where nothing can really be done.

Actually, that's a really good idea, and gets around part of the problem. Maybe they can then introduce a customer bonus system that means they get their late fees back if they rent more than 5 movies in a year, thereby making the whole thing null and void for all customers.

Last time I checked, patenting was only for "new and innovative" methodologies and products. What I read in the article is neither. It is common sense to give people the products they want in the order they want them, and to give repeat customers a flat-rate on rentals. I suppose Netflix should look elsewhere for their innovations. They could try pantenting their screw over your customers [msn.com] business methodology...

Blockbuster, if you're listening, you need to lay hard into the US Patent Office and sue them for incompetently issuing bogus patents that will cost you huge penalties in legal fees and possible settlement costs.

The advantage of vigorously pursuing full-scale litigation against the patent office is that most of the research for your legal team will be done free of charge. There is a huge community who are already aware of the problem with the USPTO and can point to at least hundreds of similar bogus patents that have or may in the future cause significant financial loss to other companies.

There's a difference between patenting inventions (i.e. what the system was designed for) and patenting commercial actions and methods of organization, which is what business model patents are. Business model patents do NOT promote the Sciences and Arts. They merely ensure a monopoly without encouraging innovation.

Then you run into the doctrine of equivalents. Even if one device or method does not correspond 1:1 to the claims in the patent, infringement may be found if the device or method is sufficiently equivalent.

My good friend who has been working at netflix for approximately 5 years says that most of the employees think the lawsuit issue with blockbuster is a waste of time

Blockbuster has been getting their asses kicked in regards to marketshare vs. netflix for about the last year or so When blockbuster initially tried to compete with Nflix, the Nflix folks were a bit scared, including my buddy who was worried about the future of the company he helped develop - however, after Nflix's somewhat recent resurgence & increased user subscription, which in turn boosted the stock prices from all time lows, blockbuster has become a non-issue to Nflix (well at least to my buddy and most of the staff)
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[if] that innovation has cost you a certain amount in development costs, should you not have the right to protect that investment?

I believe not at all. Rights are granted for the benefit of the whole of society, not single individuals: otherwise you might as well reintroduce slavery, as it was very beneficial to a few guys. Having a monopoly on something that can be reproduced indefinitely such as business or programming methods, and knowledge in general, means unfairly harming everybody else. You are not damaged by someone else who's using your methods (this does not block you from using them), unless you mean by competition, and last time I checked there is quite a load of legislation that actually protects competition, as it is demonstrated to improve product quality for society.

If your competition can just steal your methods, [...]

You cannot steal a method or an idea. You can only copy it. The original author still has it.

... then you would have no incentive to innovate.

On the contrary, if you know that the competition is going to figure out your methods and implement them after a while, you know also that you must keep innovating and leveraging your position as first in the market (it takes time to make a Webshop from just an idea: and if you are slow and competition is faster than you to commercialise, it's all your fault). In other words, you have to do actual work, not rest on your laurels because some law forbid everybody else from using your methods.

From the whole society's point of view (that is, our point of view), if Netflix wins we are going to see worse service from Blockbuster and less competition. If Blockbuster wins, competition will be closer between the companies and they will have to find a way to get more customers.

The more I think of the patent system the more I think that the whole concept is flawed. As generally with IP, Beethoven and Mozart died in poverty, Britney Spears is filthy rich.

As for the "patents are bad for innovation" argument : if you come up with a way to manufacture widgets that no one else has before, and that innovation has cost you a certain amount in development costs, should you not have the right to protect that investment?

If a company comes up with a new way to manufacture widgets -- a new widget-making machine, for instance -- and you're talking about a competitor stealing the construction plans for the machine, then I think this is a different situation, and far less objectionable.

But when we're talking about business process innovation -- finding new ways to store inventory, or manage relationships with vendors and customers, or hire and retain employees, or deliver goods and services -- then I think the argument is less clear. Presumably you do these things simply to derive a competitive advantage, and the additional profits you expect to earn are incentive enough.

It used to be that the PTO wouldn't grant patents for business methods, because they saw them as abstract ideas -- this all changed with the State Street [findlaw.com] case.

PRIOR ART! Netflix has patented the old mail-based "Subscription Library" model. In the USA, they were founded by Ben Franklin, who later went on to run the USPTO after the Revolution. Here's how the subscription libraries worked:

In-town, one could stroll to the lending library (or send one's maid or footman) to return a book and pick up the next one on the list. It was a social occasion as well as a literary one. Subscription price varied depending on how many books you wanted to have in your posession at a time.

Out of town patrons paid a subscription fee (higher to cover the cost of shipping) that depended on how many books they wanted to posess at a time (a few, up to dozens of them if you were going to India), handed over or mailed in their list and waited for the postman to deliver the books. When they were finished with the book/s, they sent it/them back and got the next batch on the list that was in stock.

Netflix may have been the first to offer "all you want for a single monthly fee" for DVDs, but they aren't the first to have an "all you want for a single monthly fee" offer. Check out the local bus line at any large city. Check out downtown parking lots at any large city.

Come to think of it, almost any restaurant or fast food store offers "all you can drink until you leave for a single fee". Many sports teams offer a season pass, which is "all the local games you can attend this season for a single fee".

Rights are granted for the benefit of the whole of society, not single individuals: otherwise you might as well reintroduce slavery, as it was very beneficial to a few guys.

Are you insane? All rights are granted to individuals only, never to "society". In your example, for instance, the South benefited greatly as a society from institutionalized slavery - not just "a few guys". I'm not here to say slavery is right (in fact it is very wrong), but that granting rights to "society" means granting rights to the majority. In that case, whatever the majority (or "society") finds desirable is correct. If society decrees that slavery is beneficial, under your model of rights, then slavery is allowed.

Under the individual rights model, as the US is founded on, each individual citizen is granted all the rights of every other citizen. You have the right to be free from being enslaved, I have the right to be free from being enslaved, Bob has... get the picture?

You are not damaged by someone else who's using your methods (this does not block you from using them), unless you mean by competition, and last time I checked there is quite a load of legislation that actually protects competition, as it is demonstrated to improve product quality for society.

Pretend for a moment that you've been slaving (hehe) away in your basement to create a new method for conducting business that is vastly superior to the well-established companies already in the market. You create a new company to compete with these multi-billion dollar per year corporations, and with your business method you have the potential to blow them away. However, without a patent on your new method, all the established companies copy you immediately.

Not only did you not benefit from your hard work, you basically did all your competitors a favor by giving it away for free. You worked for nothing. What's the point in doing it again next time you have a good idea? You tell your story to a few friends, who tell it to a few more friends, and all of a sudden no one wants to innovate.

Allowing a patent on your business method gives your startup company a fighting chance to establish itself in the marketplace. The limited term of patents (currently 20 years) means that eventually, yes, all your competitors will be able to use the same business method that made you so fantastically successful. Know what that means? Time to innovate again.

Also, for the other companies that cannot use your business method, they must innovate new and even more improved business methods to compete with *you* now - they can't just use your idea and stop there.

I wish you damn socialists would just stop complaining that other people have better opportunities and luck than you because they came up with something people want and you didn't. Show me something you've invented or created and shared with the whole world gratis - what's that? You can't? Oh.

Don't stand for this. I am a Netflix customer and here is my email to them.

Netflix,

I cannot express with enough emphasis my disappointment with your decision to sue Blockbuster because they had the audacity to compete with you. I have been a Netflix member for several years and while I find your service superior to Blockbusters (which I canceled after 2 weeks) I do have something it appears you do not believe to be common among your subscribers. That thing is a conscience.

If you continue to pursue this shameful attempt to intimidate future startups from trying to compete I guarantee you that I will cancel my account. We Internet users, which constitute a large part of your subscriber base, actually follow these events with keen interest and typically find this practice of yours reprehensible. Patenting a business model, while successful on your part, is seen by many as an abuse of the system.

I ask you, on behalf of many of your subscribers, to end this, UN-American attempt to eliminate competition through dodgy manipulations of our legal and patent system.

FOR centuries he has been portrayed as an impoverished genius, who wrote begging letters to friends and ended up in a pauper's grave. But a new exhibition claims that Wolfgang Amadeus Mozart lived a solidly upper-crust life and was among the top earners in 18th-century Vienna.

Documents on display at Vienna's musical society, the Musikverein, reveal that he earned 10,000 florins a year, a huge sum.

"His income put him in the top 5 per cent of the population," Otto Biba, the exhibition's curator, said. "During this period you could lead a very comfortable upper-class life on 500 florins a year. A labourer earned just 25 florins a year."

"The 21st century needs to rescue Mozart from the lingering 19th-century romantic image of him as a struggling artist. The truth is that Mozart was a genius, but a genius who earned lots of money towards the end of his life. Sometimes he had heavy debts too. It must have been through gaming; there isn't proof, but there is no other explanation."

Mozart gained income by giving piano lessons and concerts and working as a private imperial musician. He had a billiard table and regularly visited his hairdresser. He also had a generous parking space for his carriage and lived for most of his time in Vienna in a seven-room apartment, the exhibition shows.

The documents on display include an invoice for 800 florins from his royal patron, Joseph II.

The composer lived in Vienna between 1781 and 1791, the year of his death, aged 35. He was interred in a regular communal grave in accordance with contemporary practice, Mr Biba said.

The exhibition, Mozart: A Composer in Vienna, runs until June 30. It displays bills and receipts from the last decade of Mozart's life, and is part of a year of events in Austria celebrating the 250th anniversary of the composer's birth in Salzburg on 27 January 1756.

They have a patent for not charging latefees. WTF? That's the most insane thing I've ever heard. I'm going to patent cars that don't use internal combustion engines or batteries and then sue everyone when they try to make a fuel cell car, or any car that uses another technology that hasn't been invented.

Brilliant.

Although, since I'm not charging late fees right now I suppose I'm violating netflix patent.